THE CONSULTANT, PART 2

Wow! Who'd have thought there would be a part 2?  As best I knew things were going very well, and it has been about seven years.  On occasional visits the place looked good, the way a well run place does.  The owner seemed content to playing Mr. Mom and letting the business go along smoothly.

Then a bolt out of the blue.  The young man called me to say he and his brother had been fired a week earlier!  I was totally shocked, but I waited to hear what he had to say.  I was kind of expecting a sordid story of business gone wrong, but that isn't what came out.  It appeared that the final straw was a personal disagreement and that it may have something to do with the owners children coming into the business.  Having worked in the family business myself, and for a number of family businesses I was well aware of the stress that this can cause.  The young man was asking my advice about what he should do, but this close to the actual firing I was reluctant to do much more than just listen, and ask him to keep in touch.

A second shock came about half an hour later, when the owner called too!  He called to tell me what he had done, and he also put it down to a personal disagreement.  I was worried there might have been allegations of business wrong-doing, but neither party suggested that in any way.  He told me that he and father planned on running the business again themselves.  At this point his dad was well into his eighties, and they had struggled working together before the owner had bought out his dad a while back.  So I had real reservations about this, but I just listened. Again I was very reluctant to give any advice under the circumstances.

I visited the business again in the spring.  The owner was very upbeat about what was happening.  He told me his children had rallied around and were now actively engaged in the business.  They looked busy, a lot more people working than I had seen in the past.  I walked around the plant, and could see subtle differences.  This was a seasonal business and it was a late in the season. I was surprised at the amount of unsold inventory on the floor.  Instead of the neat orderly operation I had come to know this looked a little more disheveled.  The owner spoke to me about a production problem they were having, and that they couldn't put their finger on what the problem was.  This caught me by surprise, I was no expert in producing this product, and I could see clearly what the problem was.  This was a highly automated operation.  It was clear that the people now doing the work did not understand the process, and were falling back on their experience doing it manually.  I told him where I though the problem might lie and left it at that.

A couple of months later I spoke to the owner again and he related how it had been the worse season in 30 years, and how the recession had really cut back their sales.  His company had always had the best product on the market, and they had always commanded a premium price too.  I wondered whether the product problem I saw had impacted his sales as well.  I knew that the young man had landed a job with a competitor.  So out of curiosity I gave him a call.  I asked how he was doing at the new job, and whether they had a good season.  Imagine my surprise when he started gushing about how the season had been absolutely incredible!  He said the owner told him it was his best season ever.  He also related how tough it was not being the boss anymore!

Another visit the following season showed me that things had deteriorated even further.  The owner and his dad had a falling out, big surprise there!  The daughter contacted the young man who had been fired and told him that her dad had become increasingly unstable, firing people and changing things constantly.  Sadly it looks like this once hugely successful business is in grave danger of failing completely.

The young man has left the industry completely.  He decided that some of the work I had been training him to do when we worked together in the past was way more interesting for him, and he has persued it.  Good for him, it is really good when you love what you do.

A flash from the past

The following is something I actually wrote about 21 years ago, right after my first venture crashed and burned.  I recently ran across a paper version and scanned and used OCR to get a text file. Other than correcting some obvious scan errors, and changing a few names it is exactly what I wrote then.  I hope you find it interesting.

A SHORT HISTORY OF ITS, INC.

In 1976 my dad suffered a stroke, setting in motion a chain of events that led to the founding of Integrated Tech Systems, Inc.  At 24 years of age, with no office experience at all I suddenly found myself running an electrical contracting business with six employees, $350,000 in sales, and not even a customer list. Dad held it all together by working 90 hours a week, and myself and another employee found it difficult to even catch up with both of us working 80 hours a week. So we bought a computer.

We were one of the first I believe. Apple hadn't introduced the Apple 2 yet, Radio Shack had just introduced the Model 1, and IBM would bring out the first PC in about a year. Our computer, a Southwest Technical Products, cost $12,000, for 56K of memory, 2 -8" floppy disks, a terminal, a printer, and some software. The first three months were a disaster, the software was awful, and the computer had hardware crashes at least three times a day. Then things started to come together, and as a result of the computer we finished the year with $125,000 in cash in the bank.  Not too bad for a company with $400,000 in annual sales.  I was hooked on computers.

Software was the real weak link in computers at that time, the hardware even then was capable of things we could only dream about.  After the bad experience I had with the vendor we bought our computer from I decided to try writing some software myself.  I learned Basic by rewriting all of the accounting software we had bought.  I was really excited about all the wonderful things a computer could do and I decided maybe writing software could be a pretty lucrative business.  I started a second business on the side, called Lucas Micro Systems, bought a second computer similar to the first for use at home, and started writing a commercial accounting package. A few months later IBM introduced the PC.  What a dog! It had only 8K of memory, four expansion slots and used an audio cassette for storage.  It also had an IBM logo, which was enough to prove that a lousy product with great marketing would beat a handful of great products with lousy marketing every time.  All the computer systems I had worked on were dead meat, and my software with them.

I had no intention of being a little fish in a damn big ocean full of killer whales, so what else could I do with computers?  I started looking for a smaller pond.  I found it while wiring a new greenhouse for Carl Blasig.  Carl showed me some machines he had bought from Growing Systems a few months before.  He liked the way they watered and was interested in installing them in every one of the 40 bays in his greenhouse.  His main problem was the cost, at that time the machines cost about $1800 which would require an investment of over $100,000 including labor. He asked me if I thought there would be a substantial savings if they built them themselves.  I said I would take a good look at it and find out.

I learned everything there was to know about the Growing Systems machine.  I saw lots of simple changes that would be major improvements n the way they worked.  I eventually realized though that no amount of improvement would make a simple machine like this practical for a 40 bay greenhouse.  I began developing the specifications for a machine that could handle the job.  First, it needed to be able to stop if it hit something, a greenhouse full of machines that couldn't even stop automatically would be dangerous.  Second, it should monitor other functions such as the hose which often tangled, and water pressure so the grower would be sure the crop was actually watered.  Third, it should be variable speed so the amount of water could be varied without changing all the nozzles because every crop needed a different amount of water.  Fourth, it should be able to change speed automatically by sensing some kind of marker, to accommodate the fact that warm weather crops are usually grown on the warmer fan end of the house, and cooler crops are grown on the vent end of the house.  The way greenhouses are built the machines always run from the cool zone to the warm zone and vice versa.  Fifth, all the major components should just plug in so that maintaining all those machines would be easy.  Sixth, the rail system should be very inexpensive, because so much is needed.

I concluded that all of the above was possible, using a microcomputer as the brain, but that it was financially unfeasible to put a machine in every house.  If the rail was inexpensive and the machine could be moved though, then the cost of the expensive components could be spread over many houses, and the cost per square foot would be reasonable.  I then worked up some additional specifications.  The machine must move from house to house with the hose, otherwise the cost of all the hose would be prohibitive.  The machine must connect and disconnect from the water supply automatically, otherwise there would not be enough time to do 40 bays.  The machine must move from house to house automatically, or again too much time would be wasted to get all the houses done.  Ideally the hose should not hang down below the track where it could get caught on people or carts.  I worked up a rough estimate of the parts needed and doubled it, and told Carl that I thought the machine could be built for about $6,000 excluding development cost and track.  Carl gave me a $2,000 deposit and I started designing a machine, to be delivered in about six months.

I was sitting in my office at Lucas Electric a short time later when my dad came in.  He said I wasn't doing my job, that things weren't getting done around the shop and I needed to work harder.  He was partly right, sales had tripled, our salaries had doubled, nobody was working over 50 hours a week, and I was going down to my sailboat on Wednesday afternoons.  On top of that I hated electrical work, the challenges were long gone so I quit right then and there.  My brother in law was already working in the office with me so my younger brother moved in to replace me.  Along with my dad the three of them bought my share of the business for a total of $125,000, paid out in five parts over a two year period.  Next to quitting my job this was probably one of my first major mistakes.  The two year pay out provided enough money to keep things moving, but never enough to do what needed to be done WHEN it should be done (cash flow shortage from day one).

My first step after quitting was to find another job.  This foolishness lasted all of three days. I was thirty years old, no degrees, and had been my own boss for the past six years.  Instead I went looking for shop space, and found another grower with an old leaky barn with rotting floors, and a few tools, including three milling machines, a lathe, two surface grinders, a vertical bandsaw, horizontal bandsaw, drill press, table saw, and pipe threader.  That was the good news, the bad was that none of the machinery worked, every single one was a ball of rust and broken to boot.  I hired a retired friend part time, and the two of us spent the next two months cleaning and repairing.  To provide a source of income I started taking any work I could get. I did high voltage line construction for a contractor, built truck bodies, installed greenhouse plumbing, wired a golf course sprinkler system, rebuilt machinery, and repaired welding machines for a local dealer.  I hired a part time machine shop apprentice to make parts for the watering machine for Carl Blasig, so I could work 60 hours a week to survive and be able to work on the machine myself in my spare time.

About two years after Carl gave me the deposit we delivered a working prototype, right on schedule.  It worked well , but it was completely handmade and had hundreds of parts that were machined. To build these things to sell we needed to focus on making them easy to manufacture. I thought I knew what needed to be done but by this time I was broke, and working all the time just to survive.  I had been doing work for a guy that owned a welding supply, and he became interested in what I was doing.  He seemed to have the money needed and marketing skills as well. I agreed to make him an equal partner for an investment of $100,000 with him handling the marketing and I doing the engineering.  We made a budget for everything that needed to be done and started working. We were a month from our first show and right on budget when we ran out of money again. It turned out he didn't have the $100,000 to invest, his other business was mortgaged to the hilt and he thought he could ‘trim some fat‘ to bring our project in way under budget!  He was pretty good at it too. When we bought him out it turned out the company truck was in his name personally!

 I was desperate, three years of hard work and we were going to fold a month before our first show.  I went to talk to dad and he offered to help. I had never asked before because I didn't think he wanted to help.  He never offered before because he didn't think I would want his help.  Dad helped me buy out my partner and footed the bill to finish the machine, our 2 brochures and a video tape, all of which were already begun.  We finished the machine the day before it had to be shipped to the PPGA show in Canada, it had been run in the greenhouse for one hour.  We were the hit of the show by any measure.  One person at the show remarked that the machine could do just about anything except talk.  I thought he was going to pass out when it said "Job Done". After the show we got not a single mention in any of the trade publications.  Bouldin & Lawson got a three page write up on a transplant conveyor, similar to one we were building for local growers two years earlier.  Yes, a good ole boy network does exist in the greenhouse industry.  If you aren't one of them you sure don't get any free publicity.

We came home from the show and started building a batch of 30 Grower Jrs.  I had made a decision to offer the technology we had developed for The Grower in a single house machine as well.  We even had a color brochure for it at the show, but only a prototype frame existed at that time. I figured a batch of 30 Jrs would help our cash flow and in any event we could dump them at a low price if we had to.  For six weeks after the show the phone never rang.  It was starting to look like I had made a major miscalculation. In a way I had.  I didn't know anything about the grower's seasons, and I didn't realize they would be right in the middle of the busy Poinsettia season.  Suddenly the phone did start ringing and we booked orders for one Grower, 34 Juniors, and one enormous machine we called the Super Grower, almost $250,000 in all. Our first show turned out to be the best we've ever done.  It almost put us out of business.  With three months worth of production we ended the year with $100,000 worth of product delivered and BIG cash flow problems.  Dad contributed more money and we continued on.

The Super Grower was a $70,000 white elephant that never worked as it should and we lost money on it. The Grower which we sold to Orie Van Wingerden took almost two years to complete, cost at least twice what we thought, and didn't work most of the time.  The 34 Grower Jrs had tons of problems with keyboards, motor controllers, pressure switches, keyboard cables, axles, bearings, software, you name it, if it could fail it did. Over the next two years we sold another 125 machines, and we replaced 75 bad

keyboard cables, over 100 bad keyboards, and at least 200 bad motor controllers.  Slowly but surely we worked out all the minor bugs and manufacturing problems.  At no point in time did we ever have what we really needed, a large chunk of cash to simply buy a custom made keyboard switch, and a custom made motor controller. Instead the constant stream of replacement parts sapped our strength.  But the customers loved them.

Our sales volume doubled in our second year of sales, and doubled again in the third as we introduced the Mini Grower, and we were quite sure we would double again in the fourth. We were still losing money and Dad by now had put in over $400,000. I decided to get help so I approached our friendly banker, with whom we had a sizable loan that had been guaranteed by Dad.  They told us they don't ‘get involved‘ with customers that are having problems.  It's little wonder there were so many bank failures a few years later.  A friend put me in touch with the Small Business Development Council (SBDC), a nonprofit consulting group run by the state.  They provided us with a consultant at no charge to examine our business and determine what we were doing wrong.  Their initial suspicion was that we were grossly underestimating our manufacturing costs.  The consultant came in and looked at our entire operation, and was amazed at how well organized and efficient we were.  The problem it turned out was simply cash flow.  The greenhouse industry was extremely seasonal and we were never able to accumulate enough cash to get through our peak times.  At our busiest time each year the lack of cash crippled our ability to get parts, our efficiency dropped way off, orders were delayed or lost, and we wound up with another losing year.  The consultant helped us calculate our cash needs for the coming year, Dad invested another $125,000 and we crashed into the brick wall again at full speed.

At a point in the year when things appeared to be going very well I was approached by some people at Rutgers University who were trying to raise money for a start-up company.  Rutgers had patented a gripper for picking up plugs and they wanted to commercialize it. One of the initial backers brought in an accounting professor from Farleigh Dickinson University who had a Ph.D. and about 15 years of experience in start-up companies.  By this time we were starting to have money problems again, despite all the months of careful planning we had gone through.  It had become apparent that the consultant from the SBDC had a weakness.  He did a great job of teaching us how to examine our records to determine what went wrong, but we missed two major problems in projecting where we were going.  Again in desperation I asked the FDU professor to take a look at what we were doing wrong.

The first mistake in our projections was failing to accurately project the cash needed to cover: buying parts on COD as opposed to Net 30, delays caused by manufacturing problems, customers that wanted late deliveries, some large orders from fortune 500 companies where we had to extend credit, a large overseas order requiring a large amount of non-stock materials, and delays in getting a check back on COD shipments.  Despite accurate records from the previous three years we were off nearly 100% in

our projections.  The second mistake was in not realizing that you cannot grow your way out of a cash flow problem.  Growth makes cash flow worse, extraordinary growth on the order of 100% per year creates extraordinary cash flow problems.  The professor from Farleigh Dickinson figured out how far off we were for the current year before it actually happened, just from looking at our own projections.  He also easily explained how even with less growth than we were actually experiencing we would need nearly $1 million in operating capital in about four years of time.  The brick wall had turned to reinforced concrete.

The professor suggested three possible solutions. The first solution, a rich relative was already tapped out. The second solution was to find investors, the problem being that investors want to put money into current costs not use it to pay off a ton of old debt which we were now carrying. Solution three was to license a larger company to do our manufacturing, and in effect let them carry the cash flow. I had already looked into outside investors and found little interest there, so solution three was our only hope.

We started at the top in approaching FMC, a $6 billion conglomerate, Ball Seed Company the largest in the greenhouse industry at about $150 million, Bouldin & Lawson the largest equipment manufacturer in the industry, and the Monkey Company the largest distributor in the West.  It was too small a deal for FMC, they wanted companies with a potential of at least $100 million a year and they projected we could do only about $7 million. Ball Seed wasn't interested, all their money was going into biotechnology.  Six months after closing the deal with Monkey their VP asked me why I never approached them!  Bouldin & Lawson wanted to buy us out and move me to McMinnville, Tennessee.  They were growing at nearly 40% a year already and I was very worried that adding our products to an already extensive line would mean our products would not get the effort they deserved.

Our largest customer suggested that we contact the Monkey Company.  He said that he had been dealing with them for years and that they had an excellent reputation in the industry.  We talked to other growers and other vendors in the industry and they all agreed that Joe Monkeys word was good as gold.  I did not know that Robert Monkey Jack's son had assumed the presidency and took over the day to day operations about three months before I closed the deal with JoeMonkey.  Our customer made the initial contact for us, and he suggested that we could speed things up by presenting a complete written plan that only required a yes or no to implement. At the time I did not realize the importance of this statement.

The Monkeys agreed to our plan, in which they would make us a short term loan of $100,000 to get us through the immediate cash flow crunch.  We in turn licensed them to do the manufacturing for all of our products, and made them exclusive distributors for the 13 western states, Alaska and Hawaii. The infusion of $100,000 on top of the $125,000 already committed by Dad gave us all the cash we needed to operate efficiently.  Our last four months of production during the peak season were incredible.  All the manufacturing efficiencies we had always planned for suddenly were efficient, and the labor to produce each machine was cut in half.  In the meantime I went out to Washington state to begin setting up a whole new fabrication shop from scratch.  It was a very exciting time and we were sure we had finally made it over the hump. The expectation was that within a year we would be able to easily double sales and that the new lTS department would be doing approximately $1,000,000 in sales with

about ten employees.

Getting started at the Monkey company turned out to be very difficult. The space allotted for the new shop was generally described as the South side of the building. This included an area best described as the junk yard. The plan was to move the plant maintenance man into the new department as the first new employee.  This was done without replacing him. For several weeks he did maintenance part time for 40 hours, then worked on clearing out the shop area for the rest of the week. I worked out a complete equipment layout for an area that I had been told would be the new shop.  We were then told that the company did not want to commit to using that much space for this department.  A new area was identified, which included a substantial portion of another department which we had to relocate.  The new space was some 800 square feet larger than the original area they didn’t want us to have!

An equipment list, catalogs and pricing had been worked out for all the necessary machinery several weeks before I went to Washington.  I had been in Washington for nearly three weeks and none of it had yet been ordered.  I was unable to determine whose job it was to do the ordering, it did not appear that anyone in the plant was directly responsible for purchasing capital equipment.  In frustration I got a pile of purchase orders and began filling them out for everything we needed.  I called the vendors

and told them to expect the purchase orders and mailed them out.  After that we got everything we needed.  The new shop turned out wonderful.

The employees were another story.  Several employees were moved from other departments on the recommendation of other manager s.  It appears now that they didn't have the guts or authority to fire these people and recognized the opportunity to get rid of them painlessly. Only one employee that originally worked for Monkey in fact was worth training, and he was allowed to move out of the department taking his training with him. Two additional employees from outside the company were initially hired and are still employed.  Getting rid of employees who were problems was difficult, with no employee rule book or employee performance evaluations finding just cause was tedious at best. Our intended three month startup period turned into nearly a year.

 A few key employees continued to work in New Jersey on important projects that would greatly enhance our products when production finally got rolling. With no product to sell lTS in New Jersey suffered heavy losses.  Virtually all of the first years sales were lost, and the momentum of customers buying one now and another later was interrupted.  We were determined to get back on track the following year and I hired a new salesman for the New Jersey operation which handled the Eastern two thirds of the country. We finished a new eight page color brochure, and increased our advertising back to previous levels.  In February we were notified of a price increase to take place on March 1 only a week away.  Based on the previous year’s abortive sales and production Monkeys management determined that we were losing money in a big way, and that a price increase of nearly 30% was needed.  Upon notifying all customers that had been previously quoted of the new prices we effectively cleared off approximately $500,000 in orders which customers were planning for the end of the year.  Our salesman essentially gave up as he watched two thirds of his paycheck disappear.  The Monkey Co. didn't fare any better in their part of the country.  We had easily been out selling them 3-to-1 as it was and overall the total sales came pretty much to a complete halt.

in the meantime, ITS in New Jersey finished the new Version 5 software and began delivering it to customers.  A solution to the motor controller problems was found and a low cost version of each product called ‘No Brainers' were developed to round out the product line.  Our Center-feed Hosecar was redesigned for lower cost and better performance.  Two new carts were designed and put into production to expand the types of greenhouse the products could be used in.  The frame of the Mini Grower product was redesigned for lower cost, better appearance and better operation.  And with no R&D funding from Monkey, ITS was now in debt to them for nearly $250,000.

In the meantime Monkeys marketing efforts amounted to a grand total of three magazine ads, and an article twice in their monthly newsletter.  Two attempts were made to teach flower pot salesmen how to sell robot watering systems with little success.  The ITS department manager and draftsman decided to try the old ‘Get on the phone and call the customer method’ with amazingly good results, until the price increase.  I made an unannounced trip out west to try and jar management into readjusting the pricing and succeeded in getting them to rework all the pricing.  I flew home in triumph that we finally could move forward.  No one in our New Jersey operation believed me.  They said I was the eternal optimist. A few weeks later than expected we got the new price list, and sure enough the new margins were dramatically lower.  The costs on the other hand had gone dramatically up.  We ran the new prices on a current quote for a job priced at about $6500and sure enough it had dropped by almost $20.  My salesman informed me that he was going to law school. 

On September 1, 1991 I notified the Monkey Co. of my intention to put ITS, Inc. into bankruptcy, unless Monkey agreed to write off the debt and buy the patent rights.  I think we have a deal, I read about it in theDecember issue of Grower Talks magazine.  Now if I had a contract and a job I'd be all set.

Fast forward 21 years.  The products are still on the market.

Frankenchair

I haven't been motivated to write in a while, and this blog comes from a different direction.  My dad is currently in a sub-acute rehab facility (nursing home) as the result of a relatively minor fall that broke his ankle. What's been happening there got me thinking about processes in business.

One of the things that all really successful businesses have in common is that they all have well developed processes that work.  The typical business will have many many processes, some very simple, some quite complex.  When companies don't have processes, or don't follow the ones they have, the results can be chaos.  So let's examine a typical process, in this case one in a rehab facility.

Patients invariably arrive at a rehab facility in an ambulance, from a hospital or maybe an acute rehab.  When they arrive, whether they can walk or not every patient gets a wheel chair at the front door.  So in a rehab with say 135 beds there would probably be upwards of 150 wheelchairs.  They come in different sizes and types too.  Some are lower and narrower for small patients, while others are wide and heavily built for large patients.  Some have anti-tip wheels on back, others have footrests.  In any event, as a patient you are about to meet a wheelchair, maybe for the first time in your life.  For many patients you are about to become very familiar with that chair, maybe for many weeks or even months.  Suffice it to say that chair is pretty important to your quality of life.

So dad arrives at the rehab by ambulance, from an acute rehab, and gets a wheelchair.  He's there because his ankle is in a boot with a break that is healing very slowly.  I notice right away that the wheels on his chair are worn down so much that the floor is covered in chunks of rubber, and the brakes don't work well.  Of course I am really concerned that the chair could move during transfers and he could take another fall.  So I ask about him getting another chair, and the next day when I visit he has a different chair.  The wheels are much better, but one brake doesn't work at all, it's missing parts!  So again I ask for a different chair.  When I return dad is upset because they gave him a big wide heavy chair for a very large person, and he can't even turn around without backing it out into the hallway!  So this time I actually talk to the social worker about his chair, and the poor state of the past three.  He apologizes profusely and promises to have the head of rehab, responsible for wheelchairs, look into the situation. That evening I visit, and as promised dad has another chair.  On one side the brake doesn't touch the wheel, on the other it is nearly falling off and has been repaired with parts that clearly don't belong on a wheel chair!  The next morning I meet with the social worker who introduces me to the head of rehab, and she tells me the chair problem is solved.  So I suggest we go look at it.  When she sees the broken chair she tells me someone must have swapped it out last night. However I have pictures from last night showing otherwise.

Now there is a mad rush to get dad an acceptable chair.  I decide to wait around.  While I am waiting I inspect other wheelchairs.  The patient dad shares a room with has a wheel that wobbles two inches side to side and the chair is hard to push and pulls badly to one side.  The guy has been using this chair for three months!  Another chair has brakes that don't touch either wheel.  Another has a front caster tilted to one side about 3/4 inch.  While I am waiting I over hear a conversation about dad's wheelchair.  Someone says they are going to get a chair and parts from 'the shed' to build dad a chair.  They tell me it will be awhile so I leave.  Dad calls at 5:00 PM to tell me he's been stuck in bed all day because he doesn't have a chair. At 6:00 PM he calls again to report they found his chair.  I'm expecting Frankenchair. Built  of miss-matched parts, from the corpses of long dead chairs in the shed!  I am pleasantly surprised to find dad sitting in a brand new wheelchair, with the tags still on it.

Problem solved right?  Let me see if I understand the situation.  It takes 5 attempts to find just one acceptable wheelchair, and buying one new chair solves the problem?  What happened to the first four?  I'm betting that they met the next ambulance and patient at the door, still broken!  By now it should be clear that what is really broken here is a process.  As it happens, a relative is in charge of maintenance at another facility owned by the same company.  So I ask him how it works there.

He tells me:
1. When a patient leaves housekeeping grabs the wheelchair as part of cleaning up the room, cleans it up and delivers it to the returned wheelchair pool.
2. Maintenance inspects the chair and if it is in good condition transfers it to the available wheelchair pool.  If it is bad it gets moved into the maintenance shop, where it is repaired or scrapped.  Repairs are done by a mechanic skilled in that kind of thing, not a nurse or rehab person.
3. Incoming patients get a chair from the available wheelchair pool.

Pretty simple isn't it?  Seems almost too simple, yet it works.  Processes though, even simple ones can be hard to start, and maintain.  If you don't have a process at the beginning there is lots of Inertia (see previous blog) keeping you doing what you are doing even when it doesn't work. It can be difficult to keep them working too.  If you aren't training everyone about the processes you use, they will slowly disappear.  Even tougher is how to keep a process that works from morphing into one that doesn't.  Somebody makes a tiny little change, or forgets a step, and everyone follows merrily along the wrong path.  Interestingly I noted that the rehab facility had a shelf full of binders at each nurses station marked 'Corporate Policies' I'm betting that at this facility there is a policy on wheelchairs, and it isn't being followed.

So what about at your company?  When you see something being done wrong.  Is there a process for what is being done?  Does the process you have in place work, or is everyone circumventing it?  Is everyone trained in the process?  Are they following the process?  A good step to fixing this situation is to simply sit down and write out on paper how the process should work.  I like to do this in indented outline form. I am often surprised at how 'simple' really isn't.  Often I come to the bleated realization that the correct process involves a lot more steps than everyone realizes.  Other times the sheer complexity of the process on paper can lead you to breaking it down into simpler processes that are easier to understand and implement.

Boat Anchors

I own a sailboat, although currently it resembles an anchor, having sat in the same place for almost three years.  That is what an anchor is supposed to do, keep you in one place.  On a boat, if you forget to retrieve the anchor the engine can be roaring, the bow high, and if you move at all it'll be really slow. Some employees can be like that too.

It is amazing how an anchor weighing just a few pounds could hold back a boat weighing thousands of pounds.  The same thing happens in many businesses.   A single boat anchor can hold back a whole company too.  Like the anchor on the boat, sometimes you are able to drag them along, which when looking at the shore, it look like you are making progress. However you need only look at other businesses, to realize that they are passing you by.  I am ashamed to admit it, but once took me 7 years to recognize a boat anchor and deal with him!

Boat anchors come in many forms.  Some can appear to be good loyal employees that always look out for the company's best interest.  All the ones I've ever met were very friendly too.  Outside of work they are often fun people to be around.  So how do you recognize one? The most common way is that these are invariably the people you need to actually manage, as opposed to those that simply need direction.

In the case above I finally saw what was going on when I realized that literally all the rules in the employee handbook were written to control just one employee!  It didn't really matter what the rule was about, starting time, sick days, lunch time etc.  He always skated over the edge, seemingly just to test the rule.  Of course to be 'fair' I had to apply these rules to everyone. That meant that the guy with a family problem who sometimes came in late, but always made it up and then some, was now a management problem.

It finally ended with "This just isn't working for me anymore, here is your paycheck!"  What caught me by surprise was the big sigh of relief from the other six employees.  They said "What took you so long to fire that turkey?"  I had no idea that they felt so strongly that he was holding them all back.  When I asked them why they had never complained to me about him, they responded that they thought I must have a good reason for putting up with it!

Another form of boat anchor is the person who always plays devil's advocate in every meeting. It often comes off as concern for the company not making a mistake.  For every plan of action they find a scenario where the plan will fail.  That of course is true of every plan, there is always a scenario where it will fail.  However business is a lot like baseball.  You don't win by batting 1000.  You win by batting 400 when everyone else is batting 350.  If your meetings are endless, and every meeting ends with a plan to look further and have another meeting then maybe you have a boat anchor on board.

A boat anchor can also be be a valued employee.  Growing companies often outgrow the skills of the people working in them.  If those people are in management positions you have a tough problem.  Often the skills required as a company grows are different than the skills needed when the company started.  To really grow, you must have the right people in the right seats, especially at the management level.  There is no tougher job in business than telling a valued employee that her skills are no longer up to the task.  They probably got in this position precisely because they were good at their job.  Yet not taking action has serious consequences too. You risk losing other good people at all levels.  People working under a poor manager often quit in frustration, or do poor work.  People who would be better in this position quit because they can see the anchor isn't going any place soon, so they are held back too.  Of course you have had this discussion already, and you watch closely for signs of change.  They do seem to be getting a little better.  So you give it another month, year, decade, my how time flies!

Cut the anchor loose, move them into a position they are good at, help them find another job, do it today!  The sudden acceleration towards your goals will shock you!  The anchor I cut loose?  We're still friends and I helped him get a job at one of our customers, where they love him.

The Lunchroom

How much trouble could a lunchroom possibly be?  I was wondering about this because I kept hearing people mention the lunchroom whenever they took to complaining.  So I decided to look into it further and began asking about it.

It turns out that the company needed more office space.  They had two lunchrooms, a small one accessible through the office, and a larger one accessible from the warehouse.  So they decided to build a new lunchroom for the warehouse, and demolished the old one and turned it into office space.  While construction was going on everyone would share the small office lunchroom.  Unfortunately they started the construction without the proper permits, and got caught by the building inspector, who shut down construction on the new lunchroom.

A week or two earlier we had hired a new department manager to oversee the new manufacturing operation I was setting up.  I found him and told him I had a wonderful opportunity for him, he could finish the lunchroom!  He said he didn't know anything about construction, and why did I think the lunchroom was important to him?  I explained that the lunchroom was a sore spot with everyone from the CEO to the janitor. With everyone sharing one tiny lunch room the office people were upset about the crowding, and the warehouse people were upset about feeling unwanted.  Tempers were pretty short around lunch time.  So fixing this problem would take him from new guy to home town hero.

I also explained that he was the perfect person for this task, because he was brand new.  So he could talk to the building inspector and plead for mercy, because he had gotten this job dumped on him, and besides he knows nothing about construction!  I told him that the building inspector doesn't have an axe to grind with him, like he does with everyone else here.  So all you need to do is listen carefully and do exactly what he says.  I also suggested he ask the inspector for the names of some local contractors he might recommend.  Using one of them might ease the way towards getting a Certificate of Occupancy.

He contacted the building inspector and then met with him.  It turns out the inspector was worried about the lunchroom collapsing, because a beam under it was improperly installed!  He gave him a list of the violations that needed to be fixed, and the names of three contractors we might use.  We got prices from all three, and time estimates too.  Then we used those time estimates to estimate how long it would take our one maintenance employee to complete the work, working only the few hours a week he had available.

The manager went to the CEO with this proposal.  "We can finish the lunchroom in six to eight months using our own employees, at a cost of about $3,000.  Or we can hire a contractor recommended by the building inspector and be guaranteed the job will pass inspection in just two weeks, for $3,500."  After a year of foot dragging and complaints the CEO gave the go ahead for the contractor to finish the job.  The manager got a round of applause in the new lunchroom the first day it opened.  It wasn't his problem, but he solved it to the benefit of everyone, now when he needs a hand with getting something done people remember and step up to help.

The Consultant

When I came in to work the owner rushed over to meet me.  He told me that he had met a really sharp consultant that he thought could be a huge help with his business, and that he had a meeting with him later that day.  I was not a regular employee.  I had been hired when my previous employer folded, and I was finishing projects started by them.  I had worked closely with this company since the owner was a young man some 15 years ago.  He wanted me to sit in on the meeting.

He showed up at the appointed time, wearing a very expensive suit.  He exuded success, and pulled out a book filled with business cards from companies he said he had consulted with.  His company had an impressive three letter acronym for it's name.  I could see why the owner was impressed, but it all seemed vaguely familiar.

The consultant asked a lot of questions, about problem areas the company had, about it's financial situation. Some of his questions indicated he was familiar with the industry, and he indicated his company had a lot of data from the industry which could be used to benchmark this company.  He finished up with a promise to return the next day with a summary and a quote for the kind of work they could do to help this company become better run and more profitable.  The owner was very pleased and asked me what I thought.  I told him that he certainly was very sharp, and we could learn a lot from him.

I worked from home, and stayed two nights a week in a local hotel because I lived too far away to commute daily.  That evening I went back to my hotel and researched his company on the Internet.  It turned out that the company was familiar to me, from an article in INC. magazine from about 5 years ago.  Digging a little deeper I found out that the founder of this consulting firm had been a consultant at another consulting firm, one that had approached me in the same way, nearly 20 years ago!  The sales pitch sounded familiar because it was exactly the same pitch I had heard before!

I printed out the INC. magazine article and gave it to the owner the next morning.  He read it through, and met the consultant at the door when he showed up.  He then gave him and earful and threw him out!  The INC. story detailed how so many small businesses had been victimized by this company.  The salesman was in fact very sharp, and if he actually came out and worked with you the results probably would have been quite good.  But that wasn't why he showed up.  His real job was to size up the mark, carefully getting from the owner exactly how much he could pay out of cash flow.  That would be the amount that the owner could part with quickly, before he realized he was being taken.  If he didn't have the money he'd have to consult with others, and that might expose the game plan.  The sad part is, the slick salesman probably knew enough to actually be helpful.  They got me for $12K before I pulled the plug!

That night, in my hotel room I decided to play consultant.  I knew this company very well.  The owners dad was my first big customer when I had my own business.  When he and his two brothers wanted to get dad to let them do something they often asked my advice, because dad sometimes took my advice.  Sometimes I sided with them, sometimes with dad.  So I wrote up an analysis of the employees working there.

I started with the owner, and explained his strengths and weaknesses.  He was great on strategy, but tended to lose interest in the day to day operations, causing things to fall apart.  The young lady in the office had little bookkeeping experience, didn't take the job seriously and was costing the company a lot of money in taking rebates and discounts from vendors.  The head foreman was very knowledgeable about the processes used, but was a poor manager, who preferred to work alone.  So, people weren't being trained in their jobs.  His younger brother, 21 at the time and working as the maintenance man, had a wonderful attitude and work ethic, the kind every company hopes to find, but few do.

My recommendation was for the owner to take a back seat in the day to day operations of the business.  He should focus on the strategic direction of the company.  He should let the young girl in the office work out in the plant, which she actually preferred, and replace her in the office with a qualified bookkeeper.  The young maintenance man should become the plant manager, and his older brother should now work under him!  Sounds crazy eh?

The owner told me later he got angry when he first read my 'consulting report'.  His wife however thought I had hit the nail on the head, and encouraged him to try it.  She asked me to expand on what I had written, to give them more direction.  The 21 year old young man was now running the entire multi-million dollar operation. The business has done very well, and the owner decided to become Mr. Mom to their five kids, when his wife decided to go back to work just for fun.  They did hit a snag about 4 years later.

The young manager called me one night and said he was thinking of quitting, because he was having real problems with his older brother.  His older brother had been there longer, so he felt he should leave. He wanted to know what I thought.  SoI told him the truth.  I said that for a young man of his age and education he was extremely well paid.  If he left he would take a huge cut in pay, that would take him years to recover from.  Worse, it wouldn't save his brother's job.  Because the new manager wouldn't put up with his brother for very long.  Then he'd be gone because the owner would have little choice but to let him go.

I told him to got to his brother and tell him the truth.  Tell him he is a poor employee, you are not going to put up with his problems any more, and that you will fire him if he doesn't straighten up immediately!  He did it, and the timing was right.  His brother was recovering from a hernia operation, needed because he worked alone, having alienated all the other employees.  It has been about two years and things are going well.

It was nothing more than the right people, in the right seats!

Inertia?

When a business is going in the wrong direction it can be very difficult to change that direction.  I refer to this as the Iceberg Theory of Business.  Steering a business is a whole lot like trying to steer an iceberg.  It has been attempted, using tugboats.  A really strange thing happens.  The iceberg weighs millions of tons, while the tugboat at best may weigh a few hundred tons.  When the tugboat starts pulling against the iceberg coriolis forces due to gravity come into play.  The tugboat always points directly away from the iceberg, but it starts to orbit the iceberg no matter how hard they try to steer!

Business is like that too.  The CEO may think he's steering, and he's got the throttle down pulling hard.  The business though still heads in the direction it was going before.  Inertia, an object in motion tends to stay in motion.

When I set up a new manufacturing operation on the other coast I got a chance start from scratch.  There wasn't any old culture to fix, just a new one to create.  In a previous post I talked about how I insisted that things be done right the first time, not patched or done over.  We created lots of new systems for everything we did.  Everyone got trained on the systems, including why it was done this way.  Then I left, never to return, and 18 years has gone by.

A few weeks ago I get a call from an old customer.  It seems he had just purchased some machines from that manufacturing operation for the first time.  He called me and said "When I opened the box I just knew you had something to do with this machine!"  I asked him what kind of machine it was, and it turned out it was something completely new that they had designed recently.  So I asked him what made him think I had something to do with it?  He said "The packaging job was incredible, the nicest job he'd ever seen!"  I asked him if he was smiling when he saw this?  He said "Oh yeah, and I was really excited!"   I said that was good because I used to say that we were going for an "Open Box Experience"  If the customer opens the box and smiles then things will go well.  Even if there is a subsequent problem, they will be much more forgiving and easier to deal with.

I went on to ask him questions about the packing job.  Where was the packing list? "Sitting on top with the words DO NOT UNPACK!  EVERY THING YOU WILL NEED IS IN THE ORDER YOU WILL NEED IT!  right on the envelope."  Were there labeled boxes?  "Yep, Box 1 was on top, and the rest were in order beneath it"  What was in the boxes?  "Heat sealed plastic bags that were lettered"  How about the packing list? "It was in assembly order, by boxes and bags!"  How about screws and such, were they bulk packed?  "Nope each assembly had the just the screws for that assembly in the bags. The bags were heat sealed between the screws, nuts, and washers, so you could see exactly what you got"  Were you short any parts?  "We had exactly the right amount of everything!"  Damn, they got it wrong!  "What do you mean, we got exactly what we needed?"

Well the way I originally set up the system the quotations were calculated by a complex spreadsheet.  We intentionally calculated a percentage overpack on every small item.  We considered how difficult the assembly operation was, and how likely one would be dropped and never found, and adjusted the overpack accordingly.  Since it was done at the quote stage the customer actually was paying for the spare parts, so it was profitable.  The shipping department was instructed to never overpack on their own, it was already done.  This process completely eliminated all the calls we would get from irate customers claing we shorted them, and wanting us to deliver overnight at our expense.  We knew it was working when customers apoligized for loosing parts, and requested we send them overnight at their expense!

So how did the machines look?  "They are beautiful, very well made, with excellent instructions and really work well.  We are so sorry we bought seven machines from a competitor last year.  Those machines are junk, don't work well, and we were forever getting all the parts they shorted us!"  Were those machines a lot cheaper?  "No, they were actually more expensive!"   So why didn't you buy the new ones first?  "Well we asked them for a quote and we got it promptly, but they never followed up.  The other guy stopped in here and really schmoozed everybody and told us about how great these machines were, and how many he had sold."

A couple of days later I sent the company I had worked with an email congratulating them on doing a fine job with this customer.  I related how this customer raved about their product and their service.  Then I told them the real reason I contacted them.  You see, they were losing big time, in the same way they were losing when I left.  In fact it was the reason I left.  After 18 years they still believed that a great product and great service makes sales.  Here they were with a great product, great service, up against a guy with a lousy product, and lousy service, and they STRUCK OUT!

You might think that isn't so, because they did get the second sale.  However, that was a complete fluke, not of their making.  You see the only reason they got the second sale was that this happened to be a very large customer, who really needed many of these machines, more than twice what they had already purchased from both vendors.  For 90% of the market, there would be no second purchase!  Even worse, they only got a shot at the second sale because the first company totally screwed their customer.  Had they done a halfway creditable job and kept the customer mostly happy, inertia would have kicked in.  The customer would problably have purchased more, "the devil you are familiar with is better than the one you don't know", "we'll only need to train operators on one machine", and "we'll only need one kind of spares".

At that company, the sales and marketing are still in the hands of same people that were doing it 18 years ago, and inertia is keeping them right on the same old path of missed opportunities.  What is really interesting is that the department that produced the machines in question, and is also responsible for packing, shipping and customer support, is still doing the right thing!  This is despite that fact that only one person still working there, was there at the beginning, and he isn't a manager.  Is inertia in the right direction then just as powerful as the inertia that keeps you moving in the wrong direction?